A proposed change to Section 17(5)(b)(i) could ease blocked input tax credit on business events, but existing restrictions remain until Parliament amends the law.
The 57th GST Council meeting has opened the door to a meaningful easing of input tax credit restrictions on outdoor catering, but businesses should resist the temptation to read the proposal as a blanket green light. The recommendation, made on 8 October 2026, would remove the specific block under Section 17(5)(b)(i) of the CGST Act that has long prevented many companies from claiming credit on catering costs tied to conferences, dealer meets, training sessions and product launches. Yet the change is still only a proposal. Until the law is formally amended and brought into force, the existing restrictions continue to apply.
That distinction matters because the current GST framework is more layered than a simple yes-or-no rule on catering. Even if the outdoor-catering block is deleted in the final text, other conditions can still keep credit out of reach. The general ITC requirements in Section 16 remain in place, including the need for proper tax invoices, receipt of the service, tax payment by the supplier and compliance with filing and payment rules. Separate restrictions on food and beverages may also continue to affect meals, pantry items and some hospitality खर्चes, so businesses cannot assume every food-related invoice will become creditable merely because outdoor catering is singled out for relief.
In practical terms, the proposed change could help companies that use caterers for clearly business-related events. A manufacturer hosting dealers, a trading firm running a sales-target meeting, an engineering company staging a technical seminar or an IT business organising staff training could all see a direct reduction in unrecoverable GST if the amendment is enacted in the form now suggested. The same would be true for product launches, board meetings and annual general meetings where the catering is genuinely connected to business activity. But private celebrations, unrelated functions and other non-business spending would remain outside the credit net, regardless of the new wording.
The treatment of employee canteens is likely to remain the most nuanced area. Current law already allows credit in some cases where an employer is legally required to provide a canteen, and CBIC Circular No. 172/04/2022-GST confirms that the statutory-obligation exception can apply across the blocked-credit provision. The Occupational Safety, Health and Working Conditions Code, 2020 also points to canteen obligations for certain establishments, generally those employing 100 or more workers, subject to the relevant rules. That means a mandatory factory canteen may already qualify in some situations, even before any new amendment takes effect. By contrast, voluntary office lunches or subsidised meal arrangements chosen purely as a staff benefit are more complicated, especially if the inward supply is better characterised as food and beverages rather than outdoor catering.
Cross-charges and outsourced canteen models add another layer of caution. If a factory pays a contractor to run a canteen and employees reimburse part of the cost, past advance rulings have sometimes allowed credit only on the employer-borne portion. If the canteen serves contract workers as well as permanent staff, the labour-law position and the contractual structure become important. And where the same catering service is purchased for onward taxable supply, the existing exceptions for same-category supplies or composite and mixed supplies may still be relevant. Suppliers taxed at 5% without ITC face their own rate-based limitations, but those rules are separate from the recipient’s entitlement to claim credit on the supplier’s invoice.
For businesses trying to measure the possible upside, the numbers could be material. On a series of genuine outdoor-catering expenses for dealer conferences, sales meetings, employee training and product launches, the GST at stake can quickly add up to lakhs of rupees over a year. However, the benefit will depend on the final legal text, the exact service classification, whether the expense relates to taxable or exempt activity, and whether the invoice and place-of-supply details are correct. The Council’s recommendation does not create retrospective rights, and companies cannot assume that previously blocked credit for earlier financial years will suddenly become recoverable without an express transitional provision.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
